Is Malaysia exchange rate misalignment before the 1997 crisis?

Is Malaysia exchange rate misalignment before the 1997 crisis?

This paper seeks to use the flexible-price monetary model in the cointegration and vector error correction model (VECM) contexts to determine whether there was misalignment in the Malaysian ringgit - U.S. dollar before the 1997 currency crisis. Unit roots, cointegration and weak exogeneity are t...

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Main Authors: Lee, Chin, Mohamed, Azali, Yusop, Zulkornain, Yusoff, Mohammed
Format: Article
Language:English
Published: Universiti Malaysia Sabah 2008
Subjects:
HG Finance
Online Access:http://irep.iium.edu.my/25907/
http://irep.iium.edu.my/25907/
http://irep.iium.edu.my/25907/1/IS_MALAYSIA_EXCHANGE_RATE_MISALIGNMENT_BEFORE.pdf
id iium-25907
recordtype eprints
spelling iium-259072012-10-02T00:47:17Z http://irep.iium.edu.my/25907/ Is Malaysia exchange rate misalignment before the 1997 crisis? Lee, Chin Mohamed, Azali Yusop, Zulkornain Yusoff, Mohammed HG Finance This paper seeks to use the flexible-price monetary model in the cointegration and vector error correction model (VECM) contexts to determine whether there was misalignment in the Malaysian ringgit - U.S. dollar before the 1997 currency crisis. Unit roots, cointegration and weak exogeneity are tested to validate the monetary exchange rate model. Generally, it is found that all the series are I(1) process and there exists significant cointegrating vectors. Using the cointegrating vector and the final parsimonious VECM, out of sample predictions for Ringgit exchange rate are generated. The resulting residuals between the actual and the fitted values of exchange rate are the estimated misalignments. From cointegration, our results suggest that the Malaysian ringgit was overvalued from 1995Q2-1997Q2. Based on VECM, our results suggest that ringgit was overvalued from 1995Q2-1996Q2 and slightly undervalued from 1996Q3-1997Q2. Universiti Malaysia Sabah 2008 Article PeerReviewed application/pdf en http://irep.iium.edu.my/25907/1/IS_MALAYSIA_EXCHANGE_RATE_MISALIGNMENT_BEFORE.pdf Lee, Chin and Mohamed, Azali and Yusop, Zulkornain and Yusoff, Mohammed (2008) Is Malaysia exchange rate misalignment before the 1997 crisis? Labuan Bulletin of International Business & Finance, 6. pp. 1-18. ISSN 1675-7262 http://wwwkal.ums.edu.my/lbibf/Articles/v6a1.pdf
repository_type Digital Repository
institution_category Local University
institution International Islamic University Malaysia
building IIUM Repository
collection Online Access
language English
topic HG Finance
spellingShingle HG Finance
Lee, Chin
Mohamed, Azali
Yusop, Zulkornain
Yusoff, Mohammed
Is Malaysia exchange rate misalignment before the 1997 crisis?
description This paper seeks to use the flexible-price monetary model in the cointegration and vector error correction model (VECM) contexts to determine whether there was misalignment in the Malaysian ringgit - U.S. dollar before the 1997 currency crisis. Unit roots, cointegration and weak exogeneity are tested to validate the monetary exchange rate model. Generally, it is found that all the series are I(1) process and there exists significant cointegrating vectors. Using the cointegrating vector and the final parsimonious VECM, out of sample predictions for Ringgit exchange rate are generated. The resulting residuals between the actual and the fitted values of exchange rate are the estimated misalignments. From cointegration, our results suggest that the Malaysian ringgit was overvalued from 1995Q2-1997Q2. Based on VECM, our results suggest that ringgit was overvalued from 1995Q2-1996Q2 and slightly undervalued from 1996Q3-1997Q2.
format Article
author Lee, Chin
Mohamed, Azali
Yusop, Zulkornain
Yusoff, Mohammed
author_facet Lee, Chin
Mohamed, Azali
Yusop, Zulkornain
Yusoff, Mohammed
author_sort Lee, Chin
title Is Malaysia exchange rate misalignment before the 1997 crisis?
title_short Is Malaysia exchange rate misalignment before the 1997 crisis?
title_full Is Malaysia exchange rate misalignment before the 1997 crisis?
title_fullStr Is Malaysia exchange rate misalignment before the 1997 crisis?
title_full_unstemmed Is Malaysia exchange rate misalignment before the 1997 crisis?
title_sort is malaysia exchange rate misalignment before the 1997 crisis?
publisher Universiti Malaysia Sabah
publishDate 2008
url http://irep.iium.edu.my/25907/
http://irep.iium.edu.my/25907/
http://irep.iium.edu.my/25907/1/IS_MALAYSIA_EXCHANGE_RATE_MISALIGNMENT_BEFORE.pdf
first_indexed 2023-09-18T20:38:37Z
last_indexed 2023-09-18T20:38:37Z
_version_ 1777409213937483776

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